Bengaluru, 4th January 2017: Affordable housing segment developers in Bengaluru have now been provided with a bit of respite. Bengaluru has been on the forefront of the affordable housing development move, despite the various challenges faced by the sector. This can be seen in the number of branded real estate developers in the sector and their projects. Following the Honorable Prime Minister Narendra Modi’s speech on New Year’s Eve, the sector has now got an immense shot in the arm.
In his recent speech on New Year’s Eve, the Prime Minister appealed to banks to create ways to enhance credit to low income groups and cut interest rates. In response, State Bank of India (SBI), one of the largest players in the housing industry brought its home loan interest to 8.6% from the current 9.1%. This adds 60 basis points spread above the new MCLR (marginal cost of lending rates) of 8%. Other banks like Punjab National Bank, Union Bank of India too, have brought down their benchmark lending rates by up to 0.9 percent. Another reason that made the Prime Minister’s request a feasible one to fulfill is that the demonetization drive saw a massive increase in deposit flows in banks.
This is good news for new borrowers in Bengaluru since a big reduction in home loan interest rates means their loan tenure would come down by a few years for those who opt for 20-25 year home loan. This gives a huge impetus to the housing development sector and will bring the industry closer to its goal of achieving Housing for All by 2022.
Speaking on the possible impact of this largest reduction in home loan interest rates, J C Sharma, President, CREDAI Bengaluru says, “Ever since announcement of Housing from all by 2022 scheme, the real industry has been requesting the implementation of certain requirements to enable achieving the target placed. Incentives such as this single massive reduction in interest rates is what the industry and especially the Bengaluru market is looking for. Bengaluru city has close to 30 projects with close to 16,300 units being made available to potential home owners. Demonetization has resulted in lending capacity of banks going up as the cost of capital decreases. We anticipate that in the forthcoming budget, projects in the Rs 30-45 lakhs bracket will get more importance”.
Speaking on how the various introductions by the government will give impetus to the industry, Suresh Hari, Secretary, CREDAI Bengaluru says, “With the Prime Minister’s announcement on New Year’s Eve on the reduction of interest rate – the affordable housing sector has received a major impetus. Coupled with the introduction of the RERA Bill, demonetization, special schemes for senior citizens as well as unique incentives for affordable housing, the industry is going see a huge leap in terms of development. This will allow projects to be better valued and EMI schemes to be worked out, bringing in cash into the industry and promoting completion and handover of projects quicker. This provides a huge boost to the growth of the industry and bodes very well for the several affordable housing projects in areas such as Attibele, Hosur Road, Doddaballapur Road, off KR Puram, Kanakapura Road and Tumkur Road. With scope for better absorption rates, more such projects may see the light of day”.